Behind the Manager Changes at Three International Funds

With Japan in distress, the Middle East in turmoil, and Europe struggling with an ongoing debt crisis, now is not the time you want to see a manager change at your international fund. It's tough enough having the fortitude to hang on to your fund, or have the courage to invest more, without having to suddenly wonder if the fund is worth owning at all because of uncertainty with its leadership.

Lately, though, shareholders of many international funds have found themselves in that position. A few cases in particular are worth a closer look.

Janus WorldwideJAWWX It came as no surprise that this fund's management changed recently. Brent Lynn had been clearly labeled as an interim manager when he took over in May 2010 for the departed Laurent Saltiel (who himself had only been in that position for 13 months). However, that does not mean this change is a nonevent.

Lynn has enjoyed much success as manager of Janus Overseas JAOSX, which has typically owned some U.S.-domiciled stocks, so having him in place as interim manager of Janus Worldwide wasn't a bad deal at all for that fund's shareholders. The new manager, George Maris, has lengthy experience. But his records at the public mutual funds he has run is not very compelling. That owes partly to the fact he spent much of that time in teams, making it tough to identify a record that belongs exclusively to Maris. In addition, his experience on internationally oriented funds has been limited to his most recent charge (Northern International Growth NOIGX), which he's run for just two years, and internal portfolios.

Janus' executives spent more than eight months on an extensive manager search; having the luxury of a fine interim manager in place gave them time to ponder. So it's unlikely they rushed into a poor choice. But is it a great choice? Will Janus Worldwide finally have the successful, long-term leader it has lacked since the departure of Helen Young Hayes in 2003? Given that Maris will be the fund's fifth different lead manager in that time, Janus must be hoping quite strongly the answer is "yes."

Oppenheimer International Small CompanyOSMAX This fund's shareholders would be right to question whether or not they want to continue with it. That's not to question the ability or experience of the managers who have taken over for Rohit Sah, who left in February to start a similar fund for TCW. But Sah had run this fund on his own, and had a distinctive, bold style. His approach backfired on occasion, most alarmingly in the bear market of late 2007 to early 2009. Over time, however, it had provided excellent returns.

Instead of searching for a single replacement, Oppenheimer chose to revert to the structure the fund had relied on years earlier. Two managers from Oppenheimer will lead a team of seven, each of whom will contribute ideas. Some have strong records on their own funds, such as George Evans of Oppenheimer International Growth OIGAX and Justin Leverenz of Oppenheimer Developing Markets ODMAX. But none of these managers focuses entirely on small companies, and it's doubtful that, under their guidance, the fund will have the same unusual style it did under Sah. Given the strength of the team, this might turn out to be a solid fund, but it's a different proposition than it had been.

Fidelity JapanFJPNX With the ongoing disaster in Japan, uncertainty reigns. The overlapping tragedies of the earthquake, tsunami, and nuclear crisis have left millions of lives turned upside down. These events also have disrupted industrial production and the fortunes of many Japanese companies. Probably the vast majority of firms in that country, even those based far from the earthquake zone, have had their assumptions uprooted and plans altered.

At this critical time, a shareholder of a Japan fund would want their manager in place to make tough calls between stocks that need to be trimmed or sold and those that might present rare opportunities for those with the fortitude to buy. So it can't be a comforting notion for shareholders of Fidelity Japan--the largest actively managed Japan fund--that the fund's sole manager, Robert Rowland, recently announced he'll be leaving it at the end of April after nearly four years at the helm, especially since his replacement has no public record managing a Japan fund.

The new manager, Rie Shigakawa, does have plenty of experience researching Japanese equities at Fidelity and other firms. But until 2009 she had been an analyst, not a manager. And even after that, she ran internal accounts, not public mutual funds. She has researched many different sectors in her years as an analyst, and that knowledge will come in handy. But at this moment in particular, one would feel much more confident investing with a manager who has had years of experience in a decision-making role.